Press release·02/21/2025 11:04:21

Shentel’s Transformation and Expansion: A Broadband Powerhouse Emerges

Shenandoah Telecommunications Company, commonly known as Shentel, has undergone a significant transformation over the past year, positioning itself as a leading broadband provider in the Mid-Atlantic region. Through a series of strategic moves, including the acquisition of Horizon Acquisition Parent LLC and the sale of its tower portfolio, Shentel has emerged as a broadband-focused company poised for continued growth and expansion.

Broadband Expansion and Diversification

Shentel’s core business is the provision of broadband internet, video, and voice services to residential and commercial customers across Virginia, West Virginia, Maryland, Pennsylvania, Kentucky, Delaware, Ohio, and Indiana. The company has two main broadband service offerings: Incumbent Broadband Markets, which utilize a mix of fiber-optic and hybrid fiber-coaxial networks, and Glo Fiber Expansion Markets, which are greenfield fiber-to-the-home (FTTH) deployments.

In 2024, Shentel’s total revenue grew by 21.9% to $328.1 million, driven by strong performance across all of its business segments. The Residential & SMB - Glo Fiber Expansion Markets segment saw the most significant growth, with revenue increasing by 65.0% year-over-year, as the company continued to invest in expanding its FTTH network. The Commercial Fiber segment also experienced a 59.1% increase in revenue, reflecting the growing demand for high-speed Ethernet, wavelength, and dark fiber services.

The acquisition of Horizon Acquisition Parent LLC in April 2024 further bolstered Shentel’s broadband footprint, adding approximately 27,200 unserved homes in Virginia, Maryland, West Virginia, and Ohio to the company’s service area. This strategic move, coupled with the ongoing expansion of the Glo Fiber network, has positioned Shentel as a formidable player in the regional broadband market.

Financial Performance and Outlook

Despite the significant investments in network expansion, Shentel’s financial performance in 2024 was mixed. The company reported a net loss from continuing operations of $28.4 million, primarily due to higher operating expenses and interest expenses associated with the Horizon acquisition and the company’s debt financing.

Key financial highlights include:

• Total revenue increased by 21.9% to $328.1 million, driven by strong growth in the Residential & SMB - Glo Fiber Expansion Markets and Commercial Fiber segments.
• Cost of services increased by 27.0% to $128.1 million, reflecting the higher costs associated with the Horizon acquisition and the expansion of the Glo Fiber network.
• Selling, general, and administrative expenses increased by 16.0% to $115.2 million, primarily due to higher advertising and sales costs related to the Glo Fiber expansion.
• Depreciation and amortization expenses increased by 55.4% to $98.5 million, driven by the addition of Horizon’s assets and the continued investment in the Glo Fiber network.
• Interest expense increased by 277.4% to $15.9 million, reflecting the higher debt levels following the Horizon acquisition and the amendment to Shentel’s credit agreement.

Despite the net loss from continuing operations, Shentel reported a net income of $193.8 million, primarily due to the $222.2 million in income from discontinued operations related to the sale of its tower portfolio.

Looking ahead, Shentel’s management remains optimistic about the company’s future prospects. The company’s available liquidity, which includes cash on hand, undrawn credit facilities, and government grants, totaled $399.9 million as of December 31, 2024. This strong financial position, combined with the company’s focus on broadband expansion, positions Shentel for continued growth and investment in its network infrastructure.

Acquisition and Divestiture Strategies

The Horizon acquisition and the sale of Shentel’s tower portfolio were two significant events that shaped the company’s strategic direction in 2024.

The Horizon acquisition, completed in April 2024, added approximately 27,200 unserved homes to Shentel’s service area and expanded the company’s footprint in Virginia, Maryland, West Virginia, and Ohio. This strategic move aligns with Shentel’s goal of expanding its high-speed broadband offerings to underserved communities, leveraging government funding programs such as the American Rescue Plan Act and the Infrastructure Investment and Jobs Act.

The sale of Shentel’s tower portfolio, which was completed in March 2024, generated $305.8 million in net cash proceeds. This divestiture allowed the company to focus on its core broadband business and provided the necessary funds to finance the Horizon acquisition and continue the expansion of the Glo Fiber network.

Operational Highlights and Key Metrics

Shentel’s operational performance in 2024 showcased the company’s ability to grow its customer base and drive increased adoption of its broadband services.

Key operational highlights include:

• Total homes and businesses passed increased by 30.2% to 585,340, with the Glo Fiber Expansion Markets segment accounting for the majority of the growth.
• Residential and SMB revenue-generating units (RGUs) grew by 11.1% to 261,319, driven by a 16.6% increase in broadband data RGUs.
• Broadband data ARPU (average revenue per user) increased by 2.9% to $83.67, reflecting the company’s ability to monetize its high-speed internet offerings.
• The company’s fiber network expanded to 16,830 route miles, a 70.6% increase year-over-year, supporting the continued rollout of the Glo Fiber service.

These operational metrics demonstrate Shentel’s success in executing its broadband expansion strategy and meeting the growing demand for high-speed internet services in its markets.

Challenges and Risks

While Shentel’s transformation has been largely positive, the company faces several challenges and risks that could impact its future performance.

One key challenge is the ongoing need for significant capital expenditures to support the expansion of the Glo Fiber network and the integration of the Horizon assets. In 2024, Shentel’s capital expenditures exceeded its net cash provided by operating activities by $249.7 million, and the company expects this trend to continue through 2026.

Additionally, the company’s reliance on government grants and subsidies, such as those provided by the American Rescue Plan Act and the Infrastructure Investment and Jobs Act, introduces some uncertainty. While these programs have been instrumental in funding Shentel’s broadband expansion, any changes or delays in the disbursement of these funds could impact the company’s growth plans.

Shentel also faces competitive pressures from other broadband providers, as well as potential changes in consumer preferences and technology advancements that could disrupt the industry. The company’s ability to maintain its competitive edge and adapt to evolving market conditions will be crucial to its long-term success.

Conclusion

Shentel’s transformation in 2024 has positioned the company as a leading broadband provider in the Mid-Atlantic region. Through strategic acquisitions, divestitures, and a relentless focus on network expansion, Shentel has diversified its revenue streams and strengthened its position in the rapidly evolving broadband market.

While the company’s financial performance in 2024 was mixed, with a net loss from continuing operations, the strong growth in revenue, the successful sale of the tower portfolio, and the company’s robust liquidity position suggest a promising future. Shentel’s management remains committed to capitalizing on the opportunities presented by the growing demand for high-speed internet services and leveraging government funding programs to bring broadband access to underserved communities.

As Shentel continues to execute its strategic plan, the company’s ability to navigate the challenges and risks it faces will be crucial to its long-term success. With a strong foundation in place and a clear vision for the future, Shentel is poised to solidify its position as a broadband powerhouse in the region.